Why USA Rare Earth Stock Soared Today

USA Rare Earth (NASDAQ: USAR) stock, one of a handful of start-up companies attempting to jump-start rare-earth oxide mining and rare-earth magnet manufacturing in the United States, soared 10% through 12:20 p.m. ET Tuesday.

USA Rare Earth announced earlier in the day that its Less Common Metals Europe SAS subsidiary will develop a 3,750 metric ton per annum (mtpa) metal and alloy production facility in Lacq, France. The new facility will be co-located with an existing Carester SAS 1,600 mtpa Caremag oxide processing facility in Lacq, which is scheduled for commissioning in late 2026.

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Details, please

The way this seems to work is that Carester will receive rare-earth oxide from miners and process it, then shuttle it next door to LCM for production as rare-earth metal and alloy magnets.

The French government plans to subsidize the project, covering the cost of "up to 45% of all eligible equipment" as well as covering up to €130 million ($152.6 million) for the cost of the real estate. The government may even pay for hiring and training of the employees needed to work at the new plant!

Is USA Rare Earth stock a buy?

It's not clear what the total cost of building the new facility will be. What is clear is that the French government seems willing to bear much of the cost -- which means USA Rare Earth will not need to -- in the interests of building "Europe's first metal-making platform" for rare-earth magnets, and reducing the Continent's dependence upon China for rare-earth magnet supply.

While I still have reservations about USA Rare Earth stock (which forecasts for it to keep losing money until at least 2030, how could I not?), today's announcement is clearly great news for USA Rare Earth.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.